Norwegian telecom major Telenor today wrote off its remaining fixed and intangible assets in India worth 3.9 billion Norwegian krone (Rs 3,583 crore). And, the company said it was likely to quit the country if the Telecom Regulatory Authority of India (Trai) recommendations of a steep base price for re-auction of 2G band spectrum were accepted by the government.
With this, Telenor, which holds 67 per cent stake in Unitech Wireless, has written down investments to the tune of 8.1 billion NOK (Rs 7,403 crore) in two tranches in its Indian mobile arm. following the Supreme Court's order cancelling 122 of the 2G licences in February this year. Earlier, it had written down 4.2 billion NOK.
Blaming its decision on the uncertainty clouding the sector after the cancellation of licences by the SC and subsequent re-auction recommendations of Trai, it said, in a statement: “As a precautionary measure, Telenor ASA has decided to write down the remaining fixed and intangible assets in India, amounting to NOK 3.9 billion (NOK 2.6 billion after non-controlling interests).” The write down will be included in Telenor's results for the first quarter of 2012, to be presented on May 8.
Though Siggve Brekke, the Asia head of Telenor, said the move did not mean the company “is exiting India,” he said if things did not improve, they would eventually have to take such as decision. “If the Trai recommendation becomes policy, then the government is forcing us to leave. It's quite clear that it will not work for us,” Brekke told reporters.
After the write downs,Telenor has no further accounting exposure related to India as of March 31.
In its statement, the company added: “Following the Supreme Court's ruling in February to cancel Uninor's licenses and the recent recommendation from the Telecom Regulatory Authority of India regarding the 2G license re-auction, the uncertainty has increased significantly.”
If the recommendation from Trai in its current form should be approved by the department of telecommunications, it would be almost impossible, says Telenor, to participate in the auction. It was working actively towards Indian authorities bringing forward an acceptable framework for continued operations, it added.
The telecom regulator has suggested the government start the auction with a base price of Rs 3,600 crore per MHz.
Brekke said there were three reasons why the recommendations do not make a business case. “Auction of 5MHz spectrum is not an auction. It's a trial balloon and the government is only trying to set the price level for future rounds. We can't do with so little spectrum,” he said.
Second, he said the reserve price of Rs 3,600 crore was too high. Brekke added the rollout obligations — mandating each operator set up infrastructure in villages with a population of at least 2,000 — was also not acceptable.
“It isn't logical to ask each operator to set up its own tower in every village when this is done (in a ) smarter (way) through collaboration and sharing between operators,” he said.